A Guide to Buy to Let Property Investment

Buy to let has long been a staple of property investment world and many investors’ first venture into the market.

Knowing where to begin in such an established industry can often be quite tricky, but our experts here at Pure Investor have compiled our knowledge and experience into a helpful guide to help you get started!

What is Buy to Let?

Buy to let is a property investment strategy in which investors purchase a property with the sole purpose of renting it out to a tenant. In doing this, investors can generate rental income as well as benefit from capital gains if the property’s value were to increase over time.

There are options for both short-term rentals, like holiday lets, and long-term leases. Many buy-to-let investors choose to hire property management companies to handle the day-to-day tasks, creating a truly passive income stream.

How Does Buy to Let Work?

Buy to let is a fairly simple process at its core, investors buy a property and let it out to a tenant. However, there are many other considerations and regulations that should be considered. One of the main ones is whether the cost of the property is low enough to be able to offer a competitive rent in the market.

When deciding how much to rent a property out for you need to consider how much the monthly mortgage payments, maintenance costs, and other fees will total to before adding a little extra on top as profit. If the running costs of property are too high, it can prevent you from remaining competitive on the local rental market.

Is Buy to Let a Good Investment?

Over the years, the buy to let landscape has been subject to many changes and updates to associated regulations. Some of these changes include the 3% stamp duty surcharge on additional properties introduced in 2016. This made the cost of entry for property investors higher as well as reduced the yield that was available from investment properties due to the higher cost.

However, despite the many changes that have taken place in the market, the world of buy to let investment remains strong. This is due to the many benefits that come from buy to let properties such as the ability to earn high rental yields (as high as 8% on average in some areas of the country) and the potential to earn capital growth on the property on top of the rental income.

All in all, the question of whether buy to let property is a good investment is a loaded one that comes down to many factors. If your looking to getting into buy to let investment you should consider the current state of the market, your current financial situation, as well as any risks that are involved in the investment (can you afford vacant periods if a good tenant cannot be found and what if the value of the property falls?)

BTL Mortgages Explained

Mortgaging an investment property is often the best option for many investors, although BTL mortgages differ from a traditional mortgage.

Who can get a buy to let mortgage?

Many lenders consider buy to let mortgages to be higher risk and thus borrowers will need to meet certain requirements in order to eligible. The conditions that need to be met can differ from lender to lender but often include:

• Whether or not the borrower already owns their own home.
• The borrower’s credit score and current levels of borrowing and/or credit.
• The borrowers current income outside of rental earnings.
• The age of the borrower (lenders often have a maximum age requirement of around 75 for BTL mortgages).
• A loan to value ratio of at least 75% so borrowers will need at least a 25% deposit on buy to let properties.
• The predicted rental income of the property (rental income should cover ~125% of the mortgage repayments).

How do buy to let mortgages work?

While BTL mortgages do differ from ordinary mortgages they are also a lot alike. With a buy to let mortgage the fees, interest rates, and deposits tend to be higher with many being interest only mortgages.

However, in terms of the application process, they are much the same as a traditional mortgage loan. This means that you will have to apply for the loan with a borrower and once accepted you will be able to purchase the property provided you meet all of the lender’s requirements.

How to choose the best Buy-to-Let property

In terms of buy to let property investments, many landlords often already know where they would like their buy to let property to be located. This is usually influenced by where they themselves live or by knowledge of locations that attract higher rental income per month.

The best idea in this case would be to find a happy medium between the two, purchasing a property with a good rental income, that isn’t too far away from where you live.

However, there are more things to consider than where the property is located, with finer details being key factors in your search for the perfect property. There are many questions that you may ask yourself when considering properties in a number of different areas:

• Are there any local schools and amenities nearby?
• What is the crime rate like within the area?
• Does the surrounding area of the property have good transport links?
• What is the main demographic within the area?
• Is the local area set for any developments in the near future?
• Is there a particular type of property that is more sought after within the area?
• Are letting properties in this area typically furnished by landlords?
• How much rent can you expect to receive within this area?

After finding the answers to these questions, you will be able to determine the perfect property for your upcoming investment. As well as being able to make your own decision about the best property for you to invest in, but you will also be perfectly equipped to attract potential tenants, providing them with excellent knowledge about the area.

UK  Buy to Let Hotspots

While you can purchase buy to let property anywhere in the country, some areas can offer certain benefits such as lower property prices or higher yields. Here are some of the UK’s buy to let investment hotspots.

Manchester

Known as the northern powerhouse, Manchester is one of, if not the most, sought after investment locations outside of London. Manchester offers investors average property prices below £200,000 and average yields of more than 6.5% making the area and excellent option for investors of all varieties whether you’re looking for a more luxurious investment property or a cheaper residential option.

In addition to this, Manchester has a healthy student market being home to more than 96,000 students studying across five different higher education institutions. This is music to many investor ears as it creates an excellent level of demand for student rentals in the area.

Learn more about Manchester in our Manchester Investment Guide.

Birmingham

Birmingham is the UK’s second most populous city which creates demand for rental properties and thus an opportunity for investors. The city boasts average property prices of roughly £183,000 with average gross yields of 6.1%. Also, similarly to Manchester, Birmingham is home to five universities with almost 80,000 students studying there every year.

Birmingham is full of amenities from the arts and nightlife to green space, excellent transport links and more! Learn more about Birmingham in our Birmingham Investment Guide.

London

The capital of England and the largest city in the nation, London has always been the go-to location for property investment despite it’s high average property prices of nearly £500,000 and sub 5% average yield.

However, the high cost and lower yield is vastly outweighed by the fact that level of demand in the city is ludicrously high with a large population of students (more than 500,000) and young professionals driving demand for affordable housing in the area.

Liverpool

Neighbouring the Northern Powerhouse in Manchester, Liverpool is another area that makes the list of UK buy to let hotspots. Offering investors average gross yields of 7.44% and average property prices of just £129,000 Liverpool is sure to pique the interest of any keen property investor.

Learn more about Liverpool in our Liverpool Investment Guide.

Sheffield

A beacon of British industry in years past, Sheffield has found a new lease of life within it’s property market becoming a hotspot for investors across the country. Sheffield offers average property prices of £152,000 and average yields of 6.38% making the city and excellent location for investors looking to enter the buy to let market as well as seasoned BTL veterans.

Learn more about Sheffield in our Sheffield Investment Guide.

Leeds

Located in the beating heart of Yorkshire, Leeds boasts an impressive population upwards of 790,000 with a student population of nearly 40,000. Property prices in Leeds also average out at just below £175,000 making the area affordable yet profitable with average yields of 6.67%.

Learn more about Leeds in our Leeds Investment Guide.

Invest in Buy to Let Property

Want to invest in buy to let property? Here at Pure Investor we have a wide range of HMO properties available for investors. Browse our available properties on our website today!

If you want to speak to one of our property experts, feel free to call us on 0161 337 3890 or email enquiries@pureinvestor.co.uk.

Why choose Pure Investor for Buy to Let Investment?

The key to the success and growth of Pure Investor in recent years has been our location on the outskirts of Manchester. Strategically located to offer all our consultant’s easy access to Manchester, Liverpool, Sheffield, and Leeds, we are regular visitors to all the major property developments within the key Northern Powerhouse destinations.

We are passionate about the growth and development within these locations, ensuring our consultants have a high level of expertise regarding the development opportunities within these key growth areas. For this reason, many investors choose to speak with Pure Investor first when considering property investment in the North England.

We genuinely believe in working with our clients, providing a high quality of service and information, allowing our clients to make their decision on a more informed basis. As a result of this, an increasing number of investors are choosing to return and utilise our services on an ongoing basis. This is something we are incredibly proud of, and which we are looking to continually improve on in the future.

If you are considering in investing in a property in the North of England, and don't fancy the 'hard sell' approach, please feel free to get in touch on either enquiries@pureinvestor.co.uk or call 0161 826 4606.

We look forward to hearing from you!